Born to Spend

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We'd all like to think that the Great Recession has taught us a lesson about the dangers of overspending. In the spirit of saving money, a couple of new terms have entered the popular lexicon: deleveraging (a fancy word for paying off debt) and the new frugality. More than two-thirds of those interviewed for our exclusive Thrivent Financial/Kiplinger Survey of Family Finances said they had become more frugal over the past year.

So now that Americans seem to have become disciples of thrift, I'm often asked whether I think the conversion will stick. My gut tells me no.

I hope that we'll be more financially responsible and cautious about getting into debt. A recent TransUnion study showed that the average debt per credit-card holder was $5,165, down from $5,776 a year ago (though a chunk of that probably represents bad debts charged off by card issuers). Also down: late payments and serious delinquencies on credit cards. The savings rate, once flirting with zero, recently inched up to between 3% and 4%.

But I suspect this new frugality reflects consumers' desire to bring their finances back to an even keel rather than a sea change in their behavior. In the Kiplinger survey, for example, respondents were less concerned about credit-card debt today than they were two years ago.

In their heart of hearts, Americans seem born to spend. Even after a severe recession and, thus far, a fragile recovery, spending actually picked up in recent months. It's as if consumers are looking for a reason to hit the mall. Kiplinger contributing economist Richard DeKaser, author of our Practical Economics column , notes that as housing prices stabilized and stock prices recovered over the past year (at least until the latest market turbulence), households recouped some of the wealth that evaporated between 2007 and 2009, bolstering consumer confidence. Economist Ed Yardeni, of Yardeni Research, has calculated that despite the ailing job market, real compensation per worker (including wages, salaries and benefits per payroll employee) has been hovering at near-record highs -- another potential confidence booster.

And you can't ignore consumers' hate-love relationship with credit cards -- hate the fees and high interest rates but love the convenience of using plastic to buy iPads and HDTVs. Credit standards may be tighter, but credit-card solicitations are up. Even my 21-year-old son is getting offers.

Wired to spend? To top it off, there's evidence that we may be preprogrammed to shop. Researchers at Carnegie Mellon University have discovered that the prospect of buying something appealing triggers a response in a part of the brain that's associated with pleasure -- and the prospect of paying a high price triggers a response in a part of the brain that registers pain.

One thing there's no doubt about: Everybody loves a bargain. Surveys show that more consumers are shopping at value-oriented retailers, and they're buying more items on sale.

Our cover story this month gives you 64 of the best deals we could find -- rock-bottom values on everything from stocks and mutual funds to cars, tech and travel. And here's a thought: After you steal one (or more) of these deals, take the money you saved and stash it in your emergency fund or IRA. You'll help both the economy and your personal balance sheet.

P.S. If exchange-traded funds aren't part of your investment mix, they probably should be. See our special report for strategies on how to use ETFs to build a core portfolio, make a tactical bet or even cut your taxes.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Credit and Debt

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